Campus to clients: integrating Circular 230 into the tax curriculum.

• Author: Nellen, Annette

IN 2010 AND 2011, THE IRS RELEASED NEW requirements for individuals who want to prepare or assist in the preparation of tax returns for compensation. Since many accounting majors will be involved in tax preparation during internships or post-college careers, the basics of the new IRS return preparer program and its related changes to rules of conduct should be covered in accounting majors' required tax courses. This column reviews the recent changes, including those made to Circular 230 as part of this initiative. Circular 230 covers rules of conduct for those who practice before the IRS, which includes preparing returns and assisting clients with IRS examinations, appeals, and collection matters.

Circular 230 is crucial to tax education because it forms the ethical standards of tax practice. Students who plan to become tax practitioners must become well acquainted with Circular 230 along with the underlying laws and regulations governing tax practice.

Accounting majors often intend to become CPAs. CPAs and attorneys are bound by codes of conduct set by licensing bodies that in some cases are more stringent than the Circular 230 requirements for tax preparers. Circular 230 provides ethical guidance for all tax preparers. CPAs, attorneys, and enrolled agents (EAs) who are in good standing with the IRS are authorized to provide any tax-related services to clients, assuming that the CPA, attorney, or EA is competent to perform those services. CPAs and attorneys must file a declaration that their professional status is current and state that they are authorized to represent the client to practice before the IRS. The IRS grants EA status based on a three-part examination and subsequent continuing education requirements.

Accounting majors who do not plan to become CPAs, but who want to engage in tax work, may choose to become EAs. Accounting majors could also choose to obtain the new registered tax return preparer (RTRP) designation.

New Regulations Affecting Circular 230

Regulations governing the practice of representatives before the IRS are included in a single document: Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.R.R. Part 10).

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In 2010 and 2011, Treasury issued four Treasury decisions (T.D.s) affecting Circular 230. All became effective on or before August 2, 2011:

1. T.D. 9501 requires preparers to furnish a preparer tax identification number (PTIN) on tax returns and claims for refund of tax filed after December 31, 2010. This requirement is designed to help ensure preparers are competent and trustworthy. This T.D. also introduces a new category of preparer, the RTRP. The IRS supplemented this T.D. with Notice 2011-45, which contains additional information on the RTRP designation. The IRS also provided additional guidance on PTIN eligibility in Notice 2011-6, which includes limited exceptions to the rules on who may obtain PTINs that are relevant to this column: It extends PTIN eligibility to individuals who are employed at a law firm, certified public accounting firm, or other recognized firm of the tax return preparers who sign the tax return or claim for refund that the individual works on. The individual must still pass the requisite tax compliance check and suitability check when such checks become available.

2. T.D. 9503 imposes a $64.25 fee to apply for a PTIN (with an annual renewal fee of $63). The individual liable for the application or renewal fee is the individual applying for and renewing a PTIN.

3. T.D. 9523 provides supplemental information about the PTIN fee requirements in response to comments from the practitioner community.

4. T.D. 9527 includes a wide range of revisions to Circular 230 relating to the new PTIN and RTRP rules and the statutory changes that have been made over the last few years to the standards for return preparers.

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